James Stodder, (Ph.D., Economics, Yale 1990)
Lally School of Management & Technology
Rensselaer Polytechnic Institute at Hartford
Hartford, Connecticut, USA
http://www.ngdc.noaa.gov/paleo/icecore/antarctica/vostok/vostok_data.html
CO2 and Industrialization
http://www.globalwarmingart.com/wiki/Image:Carbon_Dioxide_400kyr.png
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Surface Temp & Hurricane Intensity
Hurricane Intensity
---
Sept. Surface Temp
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“Increasing destructiveness of tropical cyclones over the past 30 years”,
Nature, 8/4/05, ftp://texmex.mit.edu/pub/emanuel/PAPERS/NATURE03906.pdf
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http://www.columbia.edu/~jeh1/mailings/2012/20120105_PerceptionsAndDice.pdf
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Majority Believes in Global Warming
Source: Yale University Project on Climate Change Communication
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Good Old Supply & Demand!
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Planning is Perfect – if No Uncertainty!
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But if Costs are Uncertain …
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… Outcome with Quantity Controls
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Losses with Quantity Controls
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Losses with Quantity Controls
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With Cost Controls, further from Equ.
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Greater Losses with Cost Controls
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Steep Decline in Benefits => Quantity Controls
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Weitzman (1973)
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What if more Gradual Define in Benefits?
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Quantity or Cost Controls?
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Cost Controls Closer to Equilibrium
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Quantity Controls Further from Equilibrium
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Costs more steeply sloped than Benefits
=> Cost Controls
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Best Method is an Empirical Question:
If Social Benefits are Less Price Sensitive
(More Steeply Sloped) than Costs
=>
Use Quantity Controls
(Pollution Permits).
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Benefits more steeply sloped than Costs
=> Quantity Controls
Prices vs. QuantitiesStodder,
Revisited:
www.rff.org/documents/RFF-DP-98-02.pdf
Pollution Permits
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If Social Benefits are More Price Sensitive
(Less Steeply Sloped) than Costs =>
Use Cost Controls
(Taxes / Subsidies).
Prices vs. Quantities Revisited:
www.rff.org/documents/RFF-DP-98-02.pdf
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Costs more steeply sloped than Benefits
=> Cost Controls
Prices vs. QuantitiesStodder,
Revisited:
www.rff.org/documents/RFF-DP-98-02.pdf
Pollution Permits
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Volatility of S02 Prices, US: 1995-2006
William Nordhaus (Copenhagen, 2009)
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Basic Business Argument:
What is more important for your Business?
• Stability in the future price of energy that your
business must pay?
or …
• Stability in the future quantity of energy that
your business must use?
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Additional Arguments:
• Carbon taxes will make the cost of carbonbased energy higher, but also more stable.
• Taxes on energy are already in place. Pollution
Permits would require new levels of bureaucracy.
• Much easier to tax oil at the refinery than check
pollution permits at the tail pipe or smokestack.
• Carbon tax applies to all users, while permits
are monitored for just the biggest polluters.
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Government Borrowing still Cheap!
http://research.stlouisfed.org/fred2/graph/?g=rzb
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